“It’s important that states stay forward looking, in terms of business law,” said W. Raymond Felton, chairman of the corporate department at the Greenbaum, Rowe, Smith & Davis law firm, in the Iselin section of Woodbridge. “LLCs have become overwhelmingly the business entity of choice.”
The new law makes a number of changes to the previous LLC guidelines in New Jersey, including changes related to the duration of an LLC, management, fiduciary duties, indemnification, exculpation, deadlock and oppression.
Felton said this is the first major revision since New Jersey’s Limited Liability Company Act was adopted in 1993, when LLCs were relatively new throughout the country.
“There weren’t a lot of precedents back then in how to prepare a statute,” he said. “This makes it more complete in the issues it covers. The prior statute left a lot to speculation.”
The changes allow partners to report business income as personal income, while offering corporate-style liability protections for their partners. The changes include eliminating the default — and often overlooked — rule that LLCs have a limited life; permitting LLC operating agreements to be oral, written or implied, based on how the LLC has operated; allocated LLC profits and losses on a per capita basis, unless otherwise agreed; and allowing an LLC member to seek to dissolve the company if its managers are acting in a manner harmful to the member.